The Department of Labor (DOL), in its first meaningful revision since 1958 to its joint employer regulation, announced a proposed rule to change how joint employer status is determined going forward. This is of particular importance to the franchise industry, where franchisors strive to not be considered a joint employer.

The DOL proposal has a four-factor test that evaluates whether a potential joint employer exerts control to:

  • Hire or fire the employee
  • Supervise and control the employee’s work schedules or conditions of employment
  • Determine the employee’s rate and method of payment, and
  • Maintain the employee’s employment records.

Included in the DOL proposal are examples that further clarify joint employer status. One example in particular depicts Franchisor A – a global hospitality brand with thousands of hotels under franchise agreements – and Franchisee B who owns one of the hotels as a licensee of A’s brand. Even though Franchisor A provides Franchisee B with a sample employment application, sample employee handbook, and other forms for operating the franchise, because the licensing agreement states that Franchisee B is solely responsible for all day-to-day operations, including hiring and firing employees, etc., Franchisor A is not considered a joint employer.

Given the above example, franchisors should be able to set standards for thorough franchisee employee background checks to safeguard the entire brand and the franchise network. If hiring standards are developed as to the type of criminal convictions that would disqualify someone from employment, it should be made clear in the franchise agreement that the franchisee is solely responsible for all day-to-day operations, including the hiring and firing of employees.

The Department of Labor is seeking comments, which must be received by June 10, 2019 and they can be submitted electronically at (ID # WHD-2019-0003-0001). For franchisors and others who fight legal battles not to be considered a joint employer, now is the time to make your comments known.

Posted by: Rudy Troisi, President and CEO, Reliable Background Screening

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